Sole Proprietorships for Computer Reseller Businesses Explained

​​A sole proprietorship is the simplest and least expensive business structure to form when starting a computer reseller business as a one-man shop. It is owned and operated by a single individual or a married couple.

In this case, the individual owns and operates the business and is personally liable for all business debts, profits and loss. All assets are owned by the owner as personal property.

A sole proprietorship is by far the easiest and least complicated way to start and run a computer reseller business. You don’t need any start-up papers or contracts; neither do you need the service of an attorney. As a sole proprietor you may conduct business with a trade name other than your legal name. This also allows you to open a business bank account with your current bank or any other banking institution.

You are also responsible to file income tax each and every year where you will be taxed on the total income of the business. Yet once your computer reseller business starts bringing in large sums of money then things can become complicated.

However, when that time comes, this can easily be solved by converting your sole proprietorship into another legal business structure such as an S Corporation. Furthermore, you can get many more tax benefits that would be available to a regular employee when running your business as a sole proprietorship. ​

Filing for taxes as a sole proprietorship:

When filing for taxes, income earned by the business is seen as income earned for the owner and must be reported on an IRS Form 1040.

Expenses of the computer reseller business can also be claimed as deductions against income for the year. You can write off almost everything within reason as a business expense, (if the expense pertained to the business).

Keep in mind that as a sole proprietorship you are taxed on all net income. Therefore, if you're going to use that income to invest back into your business to grow your business, then you may want to consider forming your business as a C-corporation. This way, you can also set aside unused funds as capital for future growth instead of being taxed for it as income. For example, marketing your business in a planned and budgeted manner is also a form of growing your business and can be added as a business expense as well.​

​When reporting income for your sole proprietorship the only forms you’ll need is a Schedule C which is attached to your annual 1040 form or a Schedule C-EZ if your business is very small.

By filing as a Schedule C you may be able to obtain business deductions for losses.

Yet if you have a rather small sized business then you may be able to file as a Schedule C-EZ rather than a Schedule C business. To do this, you would need to meet the following conditions:

1- Gross receipts of less than $25,000. 2- Claimed business expenses of less than $2,500. 3- No inventory. 4- No employees. 5- Cash accounting methods are utilized. 6- No depreciation of assets are claimed.7- No overall loss is being claimed.

However, most people file the regular Schedule C since it is basically almost the same.​

Advantages of a sole proprietorship:

Some advantages of a sole proprietorship are, easy start up, low costs, fewer regulations, individual decision making, and it is easy to close down if necessary.

Filing for taxes is simple. A sole proprietorship, you will not be taxed with a double taxation, as is in the case with a corporation. Furthermore, you the owner take all of the profits of the business, all of the time. This is the main reason that most businesses are set up in this manner.

As a sole proprietorship, you can make decisions right there and then without having to consult with anyone else. You're in total control of your computer reseller business. You wont have any conflicts with partners as there are no partners in a sole proprietorship. And most importantly, it’s one of the easiest types of businesses to set up.​

Disadvantages of a sole proprietorship:

If capital is needed then it may become difficult to raise capital under the form of a sole proprietorship. You as the owner of the business have unlimited liability as you are responsible for the business's debts, mainly because you have complete control over the business.

However, as your computer reseller business becomes more successful and begins to earn more income, then the risk which comes with the business begins to increase as more is at stake and the value of your business has increased as well. Yet to minimize that risk, you can simply transform your business into a corporation or a limited liability company. But you can worry about that later when you get there if such a circumstance arises.

You can register your business name with the state or your local county clerks’ office. Simply request and fill out the form and then mail it in with the correct filing fees.

You may also be required to run an announcement publication in your local news paper to make known to the public that your business name is now in use and your business has been established.

A sole proprietorship is recommended for most beginners in business due to its simplicity and low start-up cost. That may be why there are over 20 million sole proprietor ships in the United States which comprises over 80% of the businesses in this country.

Bottom line - starting your computer reseller business as a sole proprietorship may be the easiest and least expensive way to start, run, and build your computer reseller business.​